Solar HVAC Market Continues to Heat Up
Renewable energy is on the rise, with solar leading the charge
In August of 2015, The NEWS reported that the solar HVAC market “was in a critical state of flux.” The industry was clouded in uncertainty as the federal tax credits for solar installations and a burgeoning marketplace remained in limbo.
The credits in question were renewed in December 2015 and will run through the end of the decade. Subsequently, contractors are expanding their solar offerings while manufacturers continue to innovate and redefine HVAC’s ability to use and store solar energy.
According to the Solar Energy Industries Association (SEIA), the Solar Investment Tax Credit (ITC) has provided stability and growth to the solar sector since its initial passage in 2006. In the last decade, solar has experienced an average annual growth rate of 68 percent. This has been spurred, in part, because the cost to install solar has dropped by more than 70 percent since 2010, which has led the industry to expand into new markets and deploy thousands of systems nationwide.
“The market potential has been barely scratched,” said Eric Barger, CEO, Perfectly Green Corp. “More than 30,000 solar heating and cooling systems are being installed annually in the U.S., generating an estimated $435 million in annual revenue. Today, innovative solar a/c systems are offering American consumers cost-efficient, effective options for meeting their energy needs, greatly reducing their carbon footprints, and lowering their utility bills.”
Barger highlighted that approximately 44 percent of energy consumption in the U.S. is directly attributable to heating and cooling.
Solar a/c can play a significant role in providing an economically viable and environmentally sustainable long-term solution to these essential needs, Barger said.
Kevin Spaeth, president, Spaeth Inc. in Oklahoma City, believes the federal tax credit helps enormously in the commercial marketplace. He believes the solar market gains a greater grasp on the renewable energy market following Congress’s decision to discontinue tax credits on behalf of the geothermal sector.
“Some states have enacted legislation that penalizes solar users by imposing a tariff on the bill,” said Spaeth. “The utilities say customers who install solar do not fairly support grid maintenance. However, those same customers are helping the utility by helping with lowering demand. The real issue is the utility wants to sell the electricity but control when it is sold. States that have enacted this legislation, which has largely been pushed by utilities, need to modify the bill.”
Per SEIA, 35 percent of the solar market share in 2016 was in California, but other markets are continuing to expand, including those in Minnesota, Utah, Florida, and Texas.
“The solar electric market has been screaming,” said Vaughan Woodruff, owner, Insource Renewables, Pittsfield, Maine. There is a lot of demand for a variety of reasons. The utilization of net metering from solar electric systems to offset electric usage from heat pumps, with good policies in place, has been a huge asset. Federal tax credits are being used well and play a factor as well.
A POLICY CHALLENGE
Woodruff said the biggest challenge for solar HVAC right now is actually one of policy.
“There are so many states right now, I don’t even know how many, that have some efforts in place to undermine the benefits customers receive through net metering,” he said. “That injects uncertainty into the market. People want to invest in this long-term technology but are wondering how long benefits will be there. My home state of Maine has seen the utilities commission make a decision to erode net metering.”
Pamela Cargill, principal, Chaolysti Management Consulting, highlighted that ignoring policy area and just kind of taking it for granted is one of the biggest mistakes contractors make when first getting started in solar.
“For example, last year, in December, the public utility commission in Nevada ruled to end net energy metering,” she said. “That’s the framework by which consumers get compensated for the solar they put back on the grid at the same rate of the retail electricity that they buy it. Basically, that was thrown away overnight. The rooftop solar industry in Nevada collapsed within weeks. Many people went out of business and national solar companies left the state. We cannot take this lightly. Now, metering is coming back into place in Nevada, and the market is coming back. But laws change and policy changes, and we have to be vigilant.”
AWARENESS AND GROWTH
There are varying opinions on just how aware the nationwide consumer base is of HVAC offerings and their affordability.
There is little to no customer awareness,” said Spaeth. “It is a teaching process on every sell, and then they want to see that it is real. The concept is so amazing that it is difficult for even knowledgeable folks to grasp. Again, once there are some successful installations, hang on to your hat because that rush of wind you feel is from product racing out the door.”
Most customers now research the internet as part of their normal due diligence, said Barger.
“Savvy customers wanting the best new a/c units or the most energy-efficient or reliable equipment will certainly find options to fit their needs,” he said.
Cargill said it is important for traditional contractors to reach out to their base of customers and let them know solar can work for them.
“Being able to reach back to the customer base that we already have is a great opportunity for solar contractors,” she said. “Many HVAC contractors have a base of customers they’ve already worked with. When you add solar to your offerings, you can now go back to this base and say you are now offering solar. That is the lowest form of customer acquisition and a huge opportunity. That’s also where traditional contractors have a leg up on those solely entering the market as solar contractors.”
SEIA’s “Solar Market Insight Report 2017 Q2” paints a bright future for the solar sector.
“While 2017 installations are expected to drop slightly from a record-shattering 2016, the 12.6 gigawatts (GW) expected still almost doubles 2015, the second-largest year on record,” states the report. “After rapidly completing a record buildout in 2016 and 2017, developers will be looking to procure new projects with completion targets moving into the next decade. By 2021, there will be more than 100 GW of solar installed in the U.S. with annual totals approaching 18 GW in 2022.”
Solar growth is occurring on a state-by-state basis, Woodruff said.
“There are large nationwide utility efforts to take over this generation of solar,” he said. “States must do their due diligence and make fact-based decisions moving forward. We are in an interesting time. There is a group of folks who represent the past utility model, and the rest of us side with inevitability. When someone sees the loss of what they are used to, there is a push to retain. We are in the final throes of that resistance. I think a big driver of solar is just how inevitable it is. We will see short-term drawbacks, but solar and other renewables are trending toward continual growth. It’s pretty exciting.”
Publication date: 8/21/2017